Fitch Assigns Final Ratings to Series 2015-1 REDS EHP Trust

(The following statement was released by the rating agency)Link to Fitch Ratings' Report: Series 2015-1 REDS EHP Trusthttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871474SYDNEY, September 24 (Fitch) Fitch Ratings has assigned final ratings to Series 2015-1 REDS EHP Trust's automotive and equipment-backed floating-rate notes. The issuance consists of notes backed by automotive and equipment loans and leases originated by Bank of Queensland Equipment Finance (BOQEF), whose ultimate parent is Bank of Queensland (BOQ, A-/Stable/F2). The ratings are as follows:AUD592.5m Class A notes: 'AAAsf'; Outlook Stable;AUD43.5m Class B notes: 'AAsf'; Outlook Stable;AUD36m Class C notes: 'Asf'; Outlook Stable;AUD18m Class D notes: 'BBBsf'; Outlook Stable;AUD18.75m Class E notes: 'BBsf'; Outlook Stable; andAUD41.25m Seller notes: 'NRsf' The notes were issued by Perpetual Trustee Company Limited in its capacity as trustee of Series 2015-1 REDS EHP Trust.At the cut-off date, the total collateral pool consisted of 11,910 loan and lease receivables totalling approximately AUD740.6m, with an average size of AUD62,185. All receivables were originated by BOQEF and are amortising principal and interest loans and leases for cars and light commercial vehicles (28.4%), trucks and buses (29.4%), excavators (10.9%), trailers (10.1%) and other wheels (21.2%). The pool contains loans with varying balloon amounts payable at maturity (45.4%).The transaction also benefits from a large and diverse number of small business borrowers across a broad range of industries.KEY RATING DRIVERS Sufficient Enhancement: A sequential pay/pro rata pay structure, consistent with prior transactions, allows principal to be paid pro rata to all classes of notes. Initial hard credit enhancement (CE) to the 'AAAsf' notes totals 21%. Pro rata paydown will commence when hard CE reaches 19.5% for the Class B notes if the transaction performs consistently well.Experienced Originator: BOQEF is an established originator in the market that has been providing auto and equipment financing since 1971, and is a regular issuer in the bond market with a total of nine issues, via REDS EHP, since 2003. Diverse and Granular Portfolio: The portfolio is granular with a diverse mix of new and used cars, light commercial vehicles, trucks, buses, trailers, excavators, and other equipment. The assets are spread across a wide range of industries and geographic locations.Balloon Loans in Portfolio: The pool comprises amortising principal, and interest lease and loan receivables, with varying balloon amounts payable at maturity. The weighted average balloon is 12.6%.Subordinated Coupon: The Class C, D, E and seller notes will receive a subordinated coupon that will be paid prior to distribution of excess spread to the unit holder and will not be eligible to draw from any of the available sources of liquidity.Multiple Levels of Liquidity: Multiple sources of liquidity support ensure stable cash flows for all notes and trust expenses. Hedging arrangements are in place to address fixed-to-floating rate mismatches between the fixed rate earned on the assets and floating rate liability payments. No Residual Value Risk: All securitised loans are structured so that there is no exposure to residual value risk, with the borrower liable for such risks at all times.RATING SENSITIVITIES Unanticipated increases in the frequency of defaults and loss severity on defaulted receivables could produce loss levels higher than Fitch's base case, and would likely result in a decline in credit enhancement (CE) and remaining loss-coverage levels available to the notes. Decreased CE may make certain note ratings susceptible to potential negative rating actions, depending on the extent of the decline in coverage.Fitch has evaluated the sensitivity of the ratings assigned to Series 2015-1 REDS EHP Trust to increased defaults and decreased recovery rates over the life of the transaction. Our analysis found that the rating of all Classes were negatively impacted under mild (10%), moderate (25%) and severe (50%) default stress, with the exception of the Class A, D and E notes which remained stable under mild stress, while being adversely impacted only under a moderate and severe stress.The Class A and D notes remained stable under mild (10%) recovery stress, but adversely impacted under moderate (25%) and severe (50%) recovery stresses. The Class C and D notes remained stable under mild recovery rate stress only and negatively impacted under higher stress scenarios, while the Class E notes remained stable under all except the most severe recovery stress. The Class B notes were adversely impacted under all recovery rate stresses. The ratings of the Class E notes were adversely impacted under both a moderate and severe combination stress scenario of 25% increased defaults and 25% decrease in recovery rates, and 50% increased defaults and 50% decrease in recoveries. All other rated classes were negatively impacted under all combination stresses from mild to severe.DUE DILIGENCE USAGE No third party due diligence was provided or reviewed in relation to this rating action.DATA ADEQUACYFitch conducted a file review of 10 sample loan files focusing on the underwriting procedures conducted by BOQEF compared to BOQEF's credit policy at the time of underwriting. Fitch has checked the consistency and plausibility of the information and no material discrepancies were noted that would impact Fitch's rating analysis.Key Rating Drivers and Rating Sensitivities are further discussed in the corresponding new issue report entitled, "Series 2015-1 REDS EHP Trust", published today. Included as an appendix to the report are a description of the representations, warranties, and enforcement mechanisms.Contacts: Primary Analyst Spencer WilsonAssociate DirectorPhone +612 82560 320Fitch Australia Pty Ltd., Level 15, 77 King St, Sydney, NSW 2000Secondary Analyst Brenden AsplinAnalystPhone +612 82560 340Committee Chairperson Natasha VojvodicSenior DirectorPhone +612 82560 350Additional information is available at www.fitchratings.com.The source of information identified for this rating action was informed by information from Macquarie Bank Limited, as arranger and the issuer's counsel Allen & Overy. The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public.Applicable Criteria APAC Consumer ABS Rating Criteria (pub. 24 Jul 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=752957Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744175Criteria for Rating Granular Corporate Balance-Sheet Securitisations (SME CLOs) (pub. 06 Mar 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863220Global Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952Additional Disclosures Dodd-Frank Rating Information Disclosure Form https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr _id=991247Solicitation Status https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=991247Endorsement Policy https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&det ail=31ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S FREE WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. 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